Sales of million-dollar homes are on the rise as sales of cheaper homes fall

Million-dollar home sales are on the rise, while deals for cheaper homes are dropping, the National Association of Realtors reported Tuesday.

In March, sales of single-family existing homes priced at $1 million and above were up 7.8% from the year-earlier period. Meanwhile, sales of homes that cost between $100,000 and $250,000 (this range includes the median price of $198,500) fell 9.9% over the past year.

“Against the backdrop of minimal income growth and a still-tepid labor market, demand continues to wane. For potential homebuyers, rising prices are eroding affordability, putting further downward pressure on consumer’s ability and willingness to finance a home purchase,” Lindsey Piegza, chief economist at Sterne, Agee & Leach, wrote in a research note.

But trifles like racing prices don’t keep the rich from buying homes. Indeed, annual sales growth for million-dollar-plus homes has been outpacing sales growth for homes under $250,000 for about two years, NAR’s data show.

Several trends are showing up in NAR’s monthly figures. It’s been years since the housing bubble burst, and the number of foreclosures and cheap, troubled properties has thinned out as the market rebounded. Low inventories are pushing prices higher, and investors are pulling back their purchases now that super-cheap deals are dwindling.

Also, mortgage standards are still strict, making it tough for would-be first-time buyers and younger families that face dropping affordability to obtain credit. While some large banks have signaled that they are easing mortgage standards, lenders are increasing their focus on providing credit to borrowers who want jumbo loans. Jumbo mortgages are for greater amounts than the maximum that can be backed by federally controlled mortgage giants Fannie Mae
/quotes/zigman/226360/delayed/quotes/nls/fnmaFNMA and Freddie Mac
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“The slowly deteriorating valuation and affordability picture, as well as the almost total lack of mortgage lending, may be holding back home sales,” Paul Diggle, a property economist with Capital Economics, wrote in a research note.

The good news for those on a budget is that home-price growth is expected to slow down this year, and there are early signs that first-time buyers are picking up their share of existing-home sales, a trend that could continue if the economy is able to speed up job creation.

It’s worth noting that the priciest properties represent a small share of sales. In March, existing single-family homes priced at least $1 million made up 2.1% of sales. That share is up from 1.8% a year earlier. Meanwhile, properties priced between $100,000 and $250,000, which constitute the largest chunk of sales of existing single-family-homes, made up 44.1% of sales in March, down a bit from 44.8% a year earlier. The share of sales made up by homes priced up to $100,000 fell to 19.3% in March from 21.1% a year earlier.